Digital PIN Issuance –

White Paper

Jerome Chavanel
Head of Product Marketing,
Instant eService at Safran Identity and Security
September 2016

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1 INTRODUCTION
Worldwide migration to EMV is well engaged. Quite so. In Europe, Canada, Latin America,
Africa and Europe, more than 85% of card-present transactions are EMV based. Asia is a bit
behind with a honorable 40% but doubled the number of EMV transactions between 2014
and 2015; and even USA - where the EMV migration is just starting - the progression
between the last two years is per a factor 15. The huge EMV adoption is not pulled out of
thin air: it is the combination of efficient investment campaigns and superior technology.
Heavily promoting security, EMV card-present transaction is very concrete and an efficient
way to displace the fraud to other payment means. Authenticating the consumer – the
cardholder – is therefore one of the corner stones of this model and one of the most
convenient way to do so is to set-up a two factors authentication on the payment service:
something you own – the card – and something you know – a passphrase or a code.
While we are still waiting for other means providing the same levels of user-friendliness,
reliability and flexibility, the PIN code has taken the lion's share and remains thus far the
favored authentication means of the Issuing banks.
To ensure that our cathedral remains intact, PIN code distribution has been organized since
its origins in a very simple, strict and – surprisingly – identical worldwide manner: when the
card is leaving the factory, a counter is started and the PIN code is printed on a protected
sheet of paper two or three days later, before being shipped to the cardholder address. This
precaution is set-up to be sure that it is not possible to receive your card and your PIN code
at the same time in the mailbox. The type of paper may vary to ensure that when the user
receives the PIN mailer, he might detect any tampering with the mail, but all in all the process
is the same. Everywhere. In each and every location.
The thing is, banks have realized that if most of millennials are still happy to receive mails,
they do expect to do it from their e-mail accounts. Active users do not necessarily have the
time to use their new card in short enough notice to remember their codes. Seniors are
sometimes subjects to forgetting a four-digit code, specially when they have extensively used
cash. Banks are facing a hard point: meet increasing customers' expectations related to
service delivery while keeping the sturdiness and reliability that made the success of EMV
payment.

In the end one of the challenge faced by PIN issuance is the same than for any well-
oiled machine: how do you face change in an extremely security sensitive business?
One answer could be to consider alternative digital delivery channels to provide easier
access to PIN Codes.

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 Credit: EMVCo Worldwide EMV deployment Statistics

2 INCENTIVE FOR CHANGE

2.1 Save Money

2.1.1 Direct Costs
One of the main drivers to implement alternatives to traditional PIN delivery to customers is
the cost reduction. One lever is the basic cost of mail issuance and stamping. Going from
EMVCo figures on number of issued EMV cards in 2015, together with figures from banking
market computed from our various personalization bureaus, we can infer that total potential
cost reduction for PIN mailers is close to 500 M€ per year.

4 774Mu PIN Mailers issued per Average Price per

Numb card Stamp
3 473Mu
er of
EMV 2 368Mu
cards
issued
40
%
35c
20122013 2014 2015
ts

$$$$$$$$$$
$$$$$$$$$$
Around 500M€ per Year of potential global costs
savings*

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Even if replacement of existing PIN issuance tools will consist in an initial investment like all
pure software based solution, the return on investment is guaranteed on the first year of
activity.

2.1.2 Indirect Costs

If the switch from mail to digital channel grants immediate costs reduction on service
delivery, we have to remember that one of the major costs for a bank is the global PIN
management over a year.
If you consider that a cardholder calling a call-center will cost the bank between 5,5€ and
10€, if you add up the other associated costs with the processors, the fraud –even if it is
minimal for chip and PIN transaction, the internal management costs and so on and so forth,
some Banks consider that managing a PIN code costs them around 20€ per year.
Considering the number of codes being issued each year, decreasing those costs by a few
percent is greatly impacting the profitability of the global card issuance service.

2.2 Improve Business

Typology of cards usage greatly varies from one country to another. Nonetheless, it is
generally observed that after the second card in a wallet, the activation or transaction rate of
a card dramatically drops for the next ones.
One of the main factors for usage drop is the user forgetting the PIN code of the card. This is
where a solution that would be capable of sending on the spot a PIN code takes all its sense:
digital PIN issuance is a life-saver for the occasions where cardholder plans to use a
dedicated card but usually resort to the usual one because he forgot the PIN code. The two
main criteria there are to provide the service here and now, which are the core features of a
digital PIN issuance solution. Considering annual card fees average selling price, getting the
card on top of the cardholder wallet and get even a slight increase of activation of 1% can
quickly reach a million euro mark

30€
x 1% x = +1,05
+1,05M€
3,5 Million card issued Average Annual fee
for card usage
M€
Of Additional Revenue

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2.3 Provide Sustainable Services
According to the EPA*, paper accounts for more than half of total weight of all collected
recyclables in the United States. Globally, 339 millions of tons of paper are consumed each
year.
Most of the accounting firms advocates for paper reduction, as very significant improvement
in the quality and efficiency of their work. Being initial production of documents, copies or
mailing, the advantages of electronic document management systems vs. regular mail are
numerous. Documents can be linked electronically to a specific client, hardcopies and
associated costs are eliminated, misfiled documents are easily corrected, cost of unused
materials are saved, costs of mailing are saved, purchase and maintenance of all printing
and copying equipment is optimized and drastically reduced.

Each year, PIN mailers consumes 35 925 tons of wood

and generate 12 100t of CO2 **

Reducing dependence on paper is good for the planet but also quite good for the bottom line.

* Environmental Protection Agency

**calculation based on 80g per m² paper, for 1 200M of PIN mailers issued worldwide. Carbon balance does not consider
mailing transportation to recipient.

2.4 Meet Delivery challenges

2.4.1 Timescale
As PIN mailers are usually sent through regular postal or courier service, the time to get to
the final customer can vary greatly between the 1 day optimum and up to more than 2 weeks
in a complex case. This is challenging at best and in some cases really a show-stopper for
the banks.
In addition, Issuers and their partners have to face regularly external events, being strikes
from postal services, courier accidents, absent recipient at moment of delivery or bad
addresses. In the case of wrong address (or address change), the delay to provide the PIN
mailer is increased tenfold. This adds significant costs to a service already quite burdened by
complex manual operations and stamping prices.

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Obviously those type of service delivery timeframes are not compatible with nowadays
expectations, let alone VIP services when people can have a card delivered on the spot in
some specific locations.

2.4.2 Issuance Security

As already pointed out, the PIN mailer is currently issued in a very traditional way. Usually, a
private courier or postal services are used to deliver the envelopes to the cardholders.
The issue is that the mail can be easily intercepted by thieves in the mailbox. It is therefore
pretty feasible to lose a couple of days – best case - to a couple of weeks - if the cardholder
is on vacation before the end user signals to its bank that the PIN mailer never arrived.
In addition, there are some cases where both cards and Mailer can arrive at the same time to
the cardholder mailbox. Indeed, when the postal service is not very efficient or not organized
daily because of remote locations, all the measures set-up to prevent cards and mailer from
being sent in the meantime are reduced to nothing.
There is only one postal delivery per week, with all couriers inside. So the probability is very
high that both cards and PIN will be at the same place in the same moment, before ending
up in end-user's hands. Fraud is then extremely easy to operate.

2.4.3 Mailer Security

Another issue spotted has always been the possibility to have the PIN known by a fraudster
at convenient time, before he can plan the best moment to get his hands on the card.
To prevent PIN code tampering through inspection of the mailer, Banks have set-up series of
evolutions in the mailer format, from the initial sealed document to now laser printed patterns
or scratch codes.
Nonetheless, it has been proven that the security of those documents is not optimum and
can be easily breached in labs. Through Image analysis and special lightings, it is possible to
know without tampering with the document the value of the PIN code.
The usage of smartphones now makes those attacks even easier than before, and the final
end-user never realizes that the code has been tampered with before it is too late.

3 ALTERNATIVES
The challenges posed by regular PIN issuance have been addressed recently, through
several alternative delivery methods.

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Those solutions enable the cardholder to choose the moment of the PIN issuance and as
they are following him, to deliver it at his chosen location as well.
Those solutions also work as an alternative for PIN reissuance – or reminder – playing their
role of life-saver in some occasions. Each of them is also accompanied by an adaptation of
security standards, making the whole set of solutions ready for market adoption.
Whatever the delivery method, it is now mandatory to be able to authenticate the user
through one mean or another. Authentication is generally done thanks to a One Time
Password, which has to be communicated beforehand to the cardholder. The PIN delivery
service provider has then in charge the authentication of this OTP before he grants PIN
delivery authorization.
In all cases, their core interest from security perspective is to be able to split card delivery
channel from PIN delivery channel, as well as making tampering more difficult or useless.

3.1 SMS
SMS is usually the start of digital PIN issuance methods. The benefits are numerous to use
SMS, the first one being the delivery target. As the SMS is delivered to a mobile phone, the
chances for it to remain unnoticed for a long time are extremely low. Just as a reminder, a
regular user is watching its smartphone at least 150 times per day. In the morning, the
likelihood to forget your home keys is bigger than the one that you forget your smartphone. It
makes this delivery channel one of the best choices for cardholder awareness of its PIN
delivery.
Customer identification is done through its mobile phone number; as mentioned, PIN delivery
has to follow user authentication. Authentication OTP can be provided beforehand through
any alternative channel like card carrier, IVR, web notification and sent to the digital PIN
delivery service through a prepaid SMS.
You can then be sure that the cardholder is:

 identified thanks to its mobile phone number

 authenticated thanks to the OTP
 expecting its PIN code delivery and has chosen the more adequate moment,
with minimal impact on its environment (no need of a phone call)

From sheer security standpoint, the implementation of Flash SMS – a feature available
depending on mobile network operator equipment - can remove any risk of PIN code storage
since you can then delete the SMS as soon as it has been acknowledged.
Finally, even if unitary cost of SMS issuance is not null, it is still much more competitive than
an envelope with a stamp once the set-up costs have been met.

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3.2 WEB Interface
Usually, distinction is done between the online banking delivery interface and the mobile
application delivery interface. Though there are subtleties as to which technical components
are provided in both cases, the general idea is strictly identical: the PIN delivery service can
be called either from a website or a mobile banking app.
The constraint with this delivery method is important, because internet connection is
obviously mandatory during the delivery process. It is then especially well adapted for
sedentary use cases – request from a personal computer or a tablet – or from a smartphone
connected to a reliable network.

The benefits are nonetheless noteworthy: it is possible

for the bank to integrate the service directly within its
online banking website, therefore limiting the number of
interfaces experienced by the cardholder. It reinforce
the bank image and it can then truly benefits from its
innovation policy.
If the bank has already a cross-platform strategy, it provides a significant additional value
added service to the application deployed.
In addition, the security is quite reinforced: the customer is authenticated firsthand on the
mobile banking environment, before being requested the OTP for PIN delivery. This two level
authentication is providing an extremely solid resistance to attacks. In addition, the technical
toolset available from web-based makes it possible to have end-to-end encryption possible,
meaning that no external user can have access to the PIN value.

3.3 Alternatives Summary

Depending on the country, the alternatives presented offer efficient replacements to
traditional PIN delivery by mail. They provide satisfying answers to the problems raised by
paper, while meeting the cost efficiency criteria for reasonable volumes.
SMS are especially well-suited in environments with low smartphone penetration or data
mobile network coverage issues.
Web Interface is the preferred choice for banks emphasizing their online services or pure
internet players.

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4 SUMMARY
We have exposed the numerous benefits from choosing an alternative path to digital delivery
of PIN codes. Being for providing a better customer experience or improve business
efficiency, reduce risks or provide a more eco-friendly carbon balance, those solutions are all
providing significant gains for a minimal risk for the issuing banks. Providing the end-users
with the capability to manage their own PIN code to some extent improves business ROI,
provide better customer retention rate and offload call centers from the bank. As a wrap-up,
the benefits are listed below:

For the cardholder

 PIN delivery in the best place, at the best moment
 All the cards in his wallet can be used, bringing flexibility as to how he manages his
payment means
 Digital issuance brings the capability to be used as PIN reminder and play his role of
life-saver in some occasions

For the Banks

 Cost reduction through elimination of paper and stamping costs of issuance
 Improve of card usage and activation rate
 Reduction of fraud
 Reduction of impact on call centers
 Reduction of carbon impact and paper consumption

CREDITS
http://www.planetoscope.com/papier/379-consommation-mondiale-de-papier.html
https://www.quora.com/What-is-the-cost-of-an-average-call-center-call
http://news.bbc.co.uk/2/hi/technology/4183330.stm
https://www.emvco.com/documents/EMVCo_EMV_Deployment_Stats_2016.pdf

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 Safran Identity & Security
11, boulevard Gallieni – 92130 Issy-les-Moulineaux – France
Phone: +33 (0) 1 58 11 25 00 – www.safran-identity-security.com
Société anonyme au capital de 159.876.075 euros – 440 305 282 RCS Nanterre

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